Fool's Eye View

[ November 17, 2000 ]

2000 -- A Bumper IPO Year

By Rob Davies (TMFEssex)

Carburton Street, London -- Money flows into the market from savers all over the country every day. Standing orders and direct debits gently extract funds from our bank accounts to go into ISAs, life assurance policies, endowments and pension plans. It is this steady drip of money into the stock market that gently, and inexorably takes the market higher and higher over time.

This table show how much the UK equity market value at September has increased over the last five years.

Year  1996    1997    1998     1999     2000


£b    982    1,288    1,220    1,579    1,847

But this is not the only direction in which money can flow between the market and investors. Companies tap the market to fund their expansion plans, and that often prompts investors to contribute additional funds to subscribe to new issues.

This table shows how much the corporate sector has extracted from the stock market by new issues, and through further issues, in the last five years.

Year     New Issues     Further Issues
         £m             £m
1996     2,749          259
1997     2,909          317
1998     7,135          272
1999     6,054          579

The last two years have seen a substantial jump in the amount raised, but those numbers pale into insignificance against the amount raised this year. The next table shows the total amount of equity raised by each business sector from the market in the first nine months of this year.

Sector                   Amount Raised (£m)

Resources                       55
Basic Industries                52
General Industries             272
Cyclical Consumer Goods         49
Non-Cyclical Consumer Goods    821
Cyclical Services            6,689
Non -Cyclical Services       1,334
Utilities                       99
Financials                   5,093
Information Technology       3,658

All that amounts to a staggering £18,422m, over twice the total raised the year before. Indeed, the sum raised for Cyclical Services alone exceeds the figure for 1999 as a whole. Given the scale of this feeding frenzy it is perhaps not surprising that the market is now suffering a degree of indigestion and is fairly quiet. Although in many ways it is perhaps the resilience of the stock market in the face of this large-scale extraction of funds that is the most notable feature.

This year is clearly an exceptional one for equity fund raising, and many people must have subscribed for new issues, especially in the first quarter of the year. In fact it would be interesting to know just how many Fools did dip into their pockets to fund new issues this year. So, on the Fool's Eye View discussion board we have put a little poll to get some idea how popular it was. There are only three questions.

Did you:

• subscribe to a new issue this year?
• think hard about applying for a new issue, but got cold feet and skipped the invitation?
• never even give it a thought?

Vote here.

For more fascinating data on the stock market have a look at the London Stock Exchange website.